Market report: Morocco

All the best laid fiscal plans mean nothing when disaster strikes. Like so many countries around the world the Kingdom of Morocco hadn’t been spared from the inflationary pressures that have plagued the global economy. Long-standing internal peace and stability was proving helpful but, in the wake of a deadly earthquake, the Arab country will have to dig even deeper to weather this latest tragedy.

A 6.8 magnitude earthquake hit central Morocco in September, killing an estimated 3,000 people. The World Health Organisation reports that more than 300,000 people were affected by the disaster.

From rescue and recovery, survivors and government officials now face rebuilding, a difficult task considering many villages, located in the Atlas Mountains on the outskirts of Marrakesh, were completely wiped out.

On top of being the deadliest earthquake Morocco has seen in 60 years, according to the World Bank, the natural disaster could lead to an eight per cent loss in GDP which would account for about $10.7 billion USD.

Experts say there will be both a short and long-term negative economic impact, predicting they will spread through trade networks and supply changes and have a spill over effect on business activity. They suggest that the extent of the earthquake’s economic impact will depend on Morocco’s ability to reallocate resources towards reconstruction.

Inflation pain

This all comes in the wake of a two-year inflation shock that hit the country quick and fast. The kingdom had, up until recently, comfortably dealt with an average of no more than 1.5 per cent inflation over the past 20 years. Like many other countries, that changed.

Morocco inflation rate for 2022 was 6.66 per cent, a 5.26 per cent increase from 2021. It hit a peak of 10.1 per cent in February, a three-decade high.

Image: Adobe Stock.

Following the standard rule book, Morocco responded with interest rate hikes – three consecutive rises totaling 150 basis points.

But leaders were becoming increasingly concerned about food price levels, which some argued were as expensive as European capital cities. Food prices started to hike in 2022 on the back of the worst drought to hit the country in more than 40 years. It affected market supply, causing prices to rise to dramatic levels and was especially felt in the first months of 2023, with food prices rising at an annual pace of 18.4 per cent at the end of February.

In June, in response to these conditions the Morocco’s central bank, Bank Al-Maghrib (BAM), announced that it would not raise interest rates, but aimed to maintain stability by keeping the key rate unchanged at 3.0 per cent.


The Moroccan government’s take on the economic state of the Kingdom before the earthquake had contradicted the economic establishments. In fact, the Higher Commission of Planning’s head, Ahmed Lahlimi, said that inflation in that country was no longer an imported phenomenon, but caused by internal market conditions.

He was quoted as saying, “inflation should be considered a structural and domestic truth and we should adapt to is much like drought.”

While projections have drastically changed, exports had been predicted to decrease by 2.8 per cent, mainly driven by lower sales of phosphate and derivatives, but were anticipated to rebound with 6 per cent growth in 2024, supported by increased shipments from the automotive sector.

Import volumes were forecast to rise by 2.9 per cent in 2024 due to an increase in purchases of finished consumer goods and capital goods.

All of that has now changed, with the future looking much more uncertain.

Looking to the future

Days after the earthquake, members of Morocco’s Parliament convened to create a government fund for earthquake response at the request of King Mohammed VI.

Prime Minister Aziz Akhannouch said that the government was committed to compensating victims and helping them rebuild. Enaam Mayara, the president of Morocco’s House of Councillors, said that it would likely take five or six years to rebuild some affected areas.

One sector that will be hit hard is tourism. A huge money earner for the Kingdom, it was expected to continue its recovery since Covid – a 14.9 per cent increase in revenues in 2023. Marrakesh, which includes a UNESCO-listed historic centre, is Morocco’s tourist capital. Although international flights are still arriving at Marrakech, Morocco’s Tourism Observatory is concerned that the economic impacts of the disaster could reduce visitor numbers to the country for the rest of the year.

But in what has been seen as a much-needed win, The International Monetary Fund and the World Bank announced the annual meeting of the two global institutions would proceed in October in Marrakesh as planned, despite the disaster. The event will bring between 10,000 and 15,000 people to the city and a vital tourist dollar injection.

Meanwhile, Morocco has been forced to lean on other countries for financial aid. Officials have recently met with Germany to discuss reconstruction projects, while, in a joint statement on Sunday, the International Monetary Fund, the World Bank, the European Commission, France, India, and the African Union said they would “support Morocco in the best possible way.”

They said: “We have been and continue to be committed partners of Morocco, supporting the authorities as they have built an inclusive and resilient economy with strong institutions.”

They also promised to provide all the necessary support for any urgent short-term financial needs and for the reconstruction efforts. “To this end, we will mobilise our technical and financial tools and assistance in a co-ordinated way to help the people of Morocco overcome this terrible tragedy.”

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